As the world faces the fiscal reality witnessing fold up of not just some companies but a total collapse of certain industries, advertising was the first sector to face the brunt of this economic gloom all over the world.
Here, in the UAE, financial constraints on real estate and financial institutes, including insurance companies saw a steep decline in the advertising spend.
Maintaining a positive outlook of the industry, Avi Bhojani, a media veteran in the region and Group CEO of Bates Pan Gulf said: "Numbers in 2008 have been very healthy with major players recording unexpected revenue and growth in the business. However, the year 2009 will be a year of consolidation and the industry, along with that the clients will have to educate themselves, rediscover the operational mode and provide what is expected by quality service providers.
"Industry will surely see a emergence of professionalism in the coming year with lots of brief-case companies having to close, but that's good for the industry and I see that as a half-full glass not as half empty."
Realistically, figures back his claim as the industry showed a growth of 54 per cent in the first three quarters of 2008 over the same year in 2007. This was reported in a special report prepared by regional research company Pan Arab Research Centre.
Media heads of prominent advertising firms in the region have been upbeat about the current scenario and, despite drastic cuts in ad spend, are of the opinion that advertising in the region will bounce back and development can not afford to halt – even though it may have slowed down momentarily.
The big players say that all is not lost, and that agencies can weather the crisis if they move ahead with caution.
The crunch started slow in this part of the world, in comparison to the international media scene, but the ugly face of recession is expected to surface even more prominently in the first half of 2009, believe industry experts. Globally, companies such as Omnicom and BBDO have formally laid of employees, but in the region job cuts in the media industry have been considerably less.
Real estate and insurance sector increased their ad spend by 114 per cent over the same period last year, according to the Parc report, citing them as the largest advertising spenders during the third quarter of this year.
"The current slowdown in real estate is an international phenomenon and what we see here is only reactionary," believes Ajay Gupta, CEO of Weststar Real Estate. "However, this slowdown is bound to be reflected in our marketing and communication cost," said Gupta, justifying the current slump in ad spend by realty developers.
"Real estate has been the biggest spender in the last two years and with their projects coming to a halt for various reasons, their advertising spend has obviously slowed down considerably," opines Aldrin Fernandes, Chairman of Concept Group, a Dubai Media City based Media house that deals in advertising and publications.
With reports about mass scale job cuts in all the major developers and construction companies including Nakheel, Damac and Arabtec, this decline in ad spend is bound to take the back seat and despite their bailout plans, it's unlikely that financial boost to any sector will be transferred to their advertising and marketing budgets.
But that trend may not follow for long in the near future, voice most of the industry professionals. "The boom the ad industry witnessed with property advertising is all over for the time being. In times such as these, agencies need to reassess and adapt their business modules carefully," said Ranjit Kumar, CEO of Turning Point.
"What is going on in the international market affects the local market in the UAE," said Hisham Joudi, sales manager at Kassab Media. "We used to receive many requests and we used to close many deals with the property developers in Abu Dhabi and Dubai, but now there are much fewer requests than before. We used to see millions of dollars of spend, especially on large-format signboards, but now everyone is holding their horses and watching the market to see what's going on."
But there is hope; companies can ride over the slowdown by interacting with their clients and building their brand, says Hermann Behrens, CEO Middle East of The Brand Union.
"Strong brands are more resilient to market downturns and recession, so companies need to continue to focus on their brands," he said. "However, all of our clients are facing significant challenges, with their projects and initiatives being scrutinised and their budgets being slashed. During these times, agencies need to tune in to clients' challenges more than ever, have honest, real conversations to uncover focus areas and identify creative ways to achieve objectives. The same way we have always done things will not work. We are going to need to drop our agenda and more than ever listen, understand and deliver."
Kamal Dimachkie, managing director of Leo Burnett UAE, Kuwait and Lower Gulf, agreed. "Regionally we are tough and, as an industry, have been through worse times. So we are not pressing the panic button by putting a freeze on necessary recruiting. But we do have a contingency plan in place and are moving forward with caution. This means being in constant dialogue with clients so we can respond to the market accordingly."
For retail industry, the year has been of healthy exposure but future is to be handled with cautioned. Jayesh Ravindranath, head of corporate marketing Landmark Group voices this but clearly denies any cuts in advertising spent from the group. "We just re-launched Centrepoint for the group and all communication plans were executed as per the plan.
"Our second phase of communication will be launched in Q1 2009 and I see unlikely that we will make any cuts to our original plan," said Ravindranath. "There's bound to be a case of wait-and-watch scenario, but that will not tamper with our long-term plans of launch," he said, reflecting on the broad outlook of the group's perspective of advertising this year and in the near future.
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